JGBs retreat with Treasuries, 30-year auction eyed
TOKYO, April 15 (Reuters) - Japanese government bond futures retreated on Tuesday after a dip in Treasuries overnight on U.S. data showing a surprise rise in retail sales that eased some worries about a consumer pull-back causing a deep recession.
Bonds also fell as dealers sold some longer-dated paper to hedge their books before a 600 billion yen ($5.9 billion) auction of 30-year JGBs later in the session.
Analysts said the coupon of 2.5 percent on the new issue would draw demand as investors seek higher yields further out the curve. The 30-year yield JP30YTN=JBTC was untraded after finishing at 2.420 percent on Monday.
"If I have to buy bonds, I'd rather buy the 30-year," said Freddy Lim, an interest rate strategist at Morgan Stanley.
JGBs surrendered some of their gains from the previous day when the Nikkei share average .N225 slid 3 percent on worries about the U.S. economy after the earnings disappointment delivered by General Electric (GE.N) on Friday.
But JGBs have been steadily falling on easing fears about the extent of the credit crunch's fallout, which has given a boost to stocks, particularly those of battered financial firms.
June 10-year futures 2JGBv1 dropped 0.27 point to 139.63, falling back near a one-month low of 139.13 struck last week.
The benchmark 10-year yield JP10YTN=JBTC rose 1.5 basis points to 1.350 percent.
Trading was relatively subdued as many market players, from Japanese banks and pension funds to life insurers, were finalising investment plans for the financial year that began this month, analysts said.
September euroyen futures JEYv1 dipped half a basis point to 99.230 and matched a four-month low of 99.225 struck the previous day, partly due to a renewed rise in money market rates.
Conditions remain tight in overseas money markets despite the array of central bank efforts to pump cash into the banking system, causing slight strains in the yen money market.
The Bank of Japan injected 1 trillion yen ($9.9 billion) of funds into the banking system to help cool a rise in the overnight call rate to 0.550 percent, slightly above the central bank's 0.5 percent target.
Reflecting the tight conditions abroad, dollar and euro three-month LIBOR rates have risen to their highest levels this year above expected central bank policy target rates, as implied by overnight index swaps. (Editing by Hugh Lawson)
